Chaikin Analytics provides valuable weekly stock and market analysis. Let's see how we can profit from this week's Bearish Stock of the Week using a high probability options strategy. Watch the video then keep reading and I'll show you how I'm trading it.
Here's how I'm trading a bearish Grub Hub put diagonal...
BUY +1 DIAGONAL GRUB 100 SEP 15/JUN 15 45/40 PUT @4.70 LMT
I'm buying the September 45 put for around $650. I'm selling the June 40 put for around $195.
Ideally, the Jun 40 expires worthless, so I can sell another put in July and collect additional credit.
In an ideal world I'd roll (buy back June and sell July) 10 - 20 days prior to June expiration when the stock is trading at my short strike ($40). My probability of making some money on the trade is 66%. with NO risk to the downside. My maximum return on risk is 30% if I close the trade for max gain in June. However, my plan is to roll the short option to July and earn additional credit. The stock must cooperate by trading in a neutral to bearish range. If GRUB plummets, I'll collect some cash and close the trade. Here's the risk profile for GRUB in the money put diagonal.
I'm buying the September 45 put for around $650. I'm selling the June 40 put for around $195.
Ideally, the Jun 40 expires worthless, so I can sell another put in July and collect additional credit.
In an ideal world I'd roll (buy back June and sell July) 10 - 20 days prior to June expiration when the stock is trading at my short strike ($40). My probability of making some money on the trade is 66%. with NO risk to the downside. My maximum return on risk is 30% if I close the trade for max gain in June. However, my plan is to roll the short option to July and earn additional credit. The stock must cooperate by trading in a neutral to bearish range. If GRUB plummets, I'll collect some cash and close the trade. Here's the risk profile for GRUB in the money put diagonal.
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